elmobob14 Posted October 9, 2013 Share Posted October 9, 2013 As you all know, guidance (and enforcement) is forthcoming for fully-insured plans on nondiscrimination. Notice 2011-1 indicates that a fully insured plan that discriminates against non-highly compensated employees will be subject to civil monetary penalties of $100/day multiplied by each non-highly compensated employee that was discriminated against. For self-insured plans, however, violating 105(h) only results in the HCEs losing a tax benefit. Or so I thought. The BNA Benefits Guide states: Self-insured health benefits plans that discriminate in favor of HCEs are subject to a less onerous tax regime. Such plans that violate tax code Section 105(h) must pay a $100 excise tax per day on each beneficiary who receives discriminatory benefits in their favor, rather than the $100 per day penalty that applies to an insured plan for each individual discriminated against. Is this correct? I can't find any supporting authority for it and there's no citation. I thought loss of tax benefits was the only consequence for fully funded plans. Link to comment Share on other sites More sharing options...
lvena Posted October 9, 2013 Share Posted October 9, 2013 Close. In a self-insured plan the penalty is applied to the HCE's, and they must claim the excess reimbursement as gross income. (see treas. reg 1.105-11(e). There are also some penalties for willful, such as fines and jail time, but I have no idea if that has ever been done. Link to comment Share on other sites More sharing options...
Chaz Posted October 10, 2013 Share Posted October 10, 2013 If that is what the BNA manual states it is incorrect (and it's not even close). There is no $100 penalty for HCEs under the self-insured plan rules. As lvena states, the consequence is that HCEs are taxed on the the excess reimbursements that they receive. Link to comment Share on other sites More sharing options...
elmobob14 Posted October 10, 2013 Author Share Posted October 10, 2013 Thanks guys. That's what I thought, but BNA isn't a fly-by-night publication, so I thought I'd double check with everybody here. Weird though. Link to comment Share on other sites More sharing options...
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